Sustainable investments: conscience and social environment influence investors' decisions

The researchers at the University of Kassel asked two questions in particular: Are private individuals generally willing to accept a lower return for sustainable investments? And: Which factors are decisive for investing exclusively conventionally or (also) sustainably? For this purpose, a representative, computer-assisted survey was conducted among a total of 1001 people in Germany who make the financial decisions themselves in their households. Both studies have been published in the MAGKS Joint Discussion Paper Series in Economics - No. 40-2016 and No. 41-2016.

One finding: on average, financial decision-makers actually accept a lower rate of return for sustainable investments, i.e. in particular a lower interest rate for fixed-income securities. It is particularly important to private individuals that they associate a good, pleasant feeling with their investment. Prof. Dr. Andreas Ziegler, Head of the Department of Empirical Economic Research, explains, "This good feeling, known in the trade as a 'warm glow,' is even more important than economic factors such as a high return or low risk when deciding on sustainable investment."

Another important factor is the social environment. For example, those who assume that friends, acquaintances, colleagues or family expect them to invest sustainably are more likely to choose sustainable investment. It is also significant whether acquaintances have told them about their own sustainable capital investment. In contrast, the age or gender of investors plays a lesser role in the decision between conventional and sustainable investment.

A transparency seal would help

When it comes to political attitudes, theory and practice differ. People who vote more to the left politically - i.e. the Greens or the Left, for example - are definitely more inclined than people who vote more to the right to invest sustainably, but they have often not done so in the past. It can be assumed that these people often reject the previous practice of sustainable investments, i.e. stock investments. Gunnar Gutsche, research associate at the Department of Empirical Economics, explains, "Instead, they would like to invest in fixed-income sustainable investments, but so far these have hardly been offered."

Here, the researchers see an opportunity for politics and business to intervene in the market. Prof. Ziegler adds, "We also found in our studies that many potential investors are willing to accept a lower return for certified sustainable investments than for uncertified sustainable investments. Beyond sustainable investments, financial decision-makers also have a strong interest in some kind of government transparency seal for investments. This is an opportunity for the capital market of the future."

Contact:

Prof. Dr. Andreas Ziegler
University of Kassel
Department of Empirical Economics
E-mail: andreas.ziegler[at]uni-kassel[dot]de
Tel.: 0561 804-3038